Compuware (CPWR)

Company. Compuware provides "software tools and professional services ... [for] business applications for distributed, enterprise and web-based environments." (company website)

CPWR stock chart
loss Bottom line
-7%

Buy. It was a good idea at the time! In late May, CPWR stock jumped past the $5.50 level on heavier than normal volume. The ADX line was rising, indicating a strengthening trend. The +DI line was well above the -DI line, indicating far more buyers than sellers. The Chaikin oscillator was well above the zero threshhold.

As I expected, CPWR stock price continued to rise and reached highs around $6.50 before retreating and rising to that same level again.

Missed expectations. My experience with CPWR all centers around the Expectations game. In mid-July, Compuware announced preliminary earnings for the quarter that would widely miss analysts Expectations. The next morning, CPWR stock plummeted at the opening of the market. There was no time to get out.

CPWR stock chart on 13-Jul-03

Since the initial fall was back to the $5.50 level, I decided to hang on. Over the next two and a half months, CPWR stock slowly pulled itself back up to $6.50 again before being caught in the general end-of-September sell-off. Once again, I made the decision to hang on. CPWR had recovered before, right?

And CPWR did recover. In fact, this week CPWR fell out of my scan as a stock in a new uptrend. As you can see in the upper chart, the ADX line inched again over the 20 threshhold, and the Chaikin oscillator once more pointed up. Yesterday, when CPWR traded above the price I had paid in June, I considered a break-even trade, but chose to follow the promising signals. Greed always seems to win out over prudence.

Sell. This morning Compuware once again released "preliminary earnings," telling the market that — instead of a profit of 2¢ — they expected a loss. The market reacted swiftly to missing Expectations for the second consecutive quarter. The sell-off began. By the time I looked in on the market 20 minutes after the session began, more than a million shares had already traded. Although the price was up from the opening, I decided to sell.

"Sell!" I ordered. "Damn, damn, damn. Two strikes, CPWR, and you're out of my portfolio!"